Can the core values of a company create economic value?
Would you believe they can create 15x the returns that your stock portfolio is giving you?
People often assume that sticking to your values can cost you, at least in the short term. For instance, have you ever been in a negotiation where the other party finally stops the arbitration with a statement similar to “I value our relationship…so..”? That person is implying that they value their relationship with you more than a few extra dollars on the price. Therefore, there is a short term loss of income related to valuing the relationship more than an increased selling price.
The seller’s assumption is that the relationship will in the long term generate much higher profits than the short term gain from a higher asking price.
But is that true?
According to Jim Collins’ and Jerry Porras’ ground breaking research study of visionary companies, firms that have fixed core values and core purpose but adapt their strategies and practices have outperformed the stock market by a factor of 15 to 1 since 1925! Collins and Porras identify many characteristics of what separates their “visionary” companies from the comparison companies, but found that the visionary companies were more ideologically (values/purpose) driven and less purely profit driven in seventeen of the eighteen comparisons. In fact, the pursuit of ideology over pure profit was one of the clearest differences they found between the visionary and comparison companies.
We are all fairly disappointed in the returns the stock market has been providing us lately, and I’m sure most of us feel that investing in our companies will provide us a greater return on our equity than the general market. Imagine multiplying the stock market returns 15x by aligning all of your company’s activities through the core values and core purpose of your organization. And financial returns are not the only benefit you will see. Your workplace will become easier to manage, you will attract and retain the right employees and you will be surrounded by and working with people you truly care for and trust.
I can see everyone scurrying for the calendars now. Quick – we must schedule an executive off-site meeting to set/renew our vision! Not so fast… Your company’s core ideology (which consists of your core values and core purpose) is already set. You may not have set them or you may have set them, framed them and hung them on the wall. In a surprising twist, most of the Values and Missions statements hanging on company walls have little to do with the values that are used to make decisions in the company every day.
That is because setting the vision is only 1% of the solution. The hard part (other 99%) is aligning your company to that vision!
If you would like to learn more about aligning your organization behind your core values please contact us.